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CommonWealth REIT makes changes amid investor spat

NEWTON, Mass. (AP) -- CommonWealth REIT said Monday that it was altering its board of trustees and making other changes amid a fight with activist shareholders.

Corvex Management LP and Related Fund Management LLC, who together own about 9.6 percent of Commonwealth, have pushed to replace all the board members. Corvex and Related on Monday said that the latest moves weren't enough. Corvex is an investment firm and Related is an affiliate of Related Cos., a real estate company.

CommonWealth, a real estate investment trust which invests in office and industrial buildings, said that it would increase the size of its board from its current five members, and have a greater proportion of independent trustees. The company said that it has hired an executive search company to find candidates.

CommonWealth is also changing fees made to Reit Management & Research LLC, which manages the company. For one, CommonWealth said that starting in 2014, 10 percent of business management fees made to Reit Management will be paid in its common shares instead of all cash. Reit Management, known as RMR, is a privately owned company that was founded by and is run by CommonWealth's founder and managing trustee Barry Portnoy. His son, Adam Portnoy, is president and CEO of RMR and a managing trustee and president of CommonWealth.

Citi analyst Michael Bilerman said that the changes were "too little and too late," in a note to clients. "There are too many executives wearing too many hats," Bilerman said.

Corvex and Related filed a lawsuit in February alleging that CommonWealth breached its duties to shareholders. Corvex and Related have also been trying to replace all the members of CommonWealth's board of trustees since April, saying that the company is undervalued. Corvex and Related have said that they wanted to buy CommonWealth.

Corvex and Related released a joint press release Monday about CommonWealth REIT's moves. "Today's announcement is nothing more than hollow rhetoric and a desperate attempt to keep Barry Portnoy and his son Adam in control of CommonWealth," the companies said in a statement.

Arbitration between the three companies is scheduled to begin Oct. 7, CommonWealth said. CommonWealth's board of trustees also said that it would end its shareholder rights plan, which shields a company from a takeover, after arbitration with Corvex and Related is over.